Cooper Tire and Rubber races to keep up with rising material costs

Cooper Tire & Rubber Company (CTB) reported its fourth quarter 2010 results last week. CEO Roy Armes noted that raw material costs are skyrocketing although he expects the rate of increase to cool down a bit in the second quarter of this year. CTB has been increasing prices to keep pace with these rising material costs. Another price increase is coming mid-March.

From the earnings report (emphasis mine):

“The largest challenge currently facing the Company is the increase in natural rubber prices, which increased more than 75 percent during the last four months. Raw material costs have increased between 15 percent and 20 percent sequentially from the fourth quarter of 2010 to the first quarter of 2011. We expect raw material costs to remain at elevated levels after the first quarter; however, the rate of increase should begin to slow during the second quarter. We continue aggressively taking every action possible to internally offset these cost increases, but it was necessary to announce a price increase in the United States effective March 15, 2011, by a weighted average of 8 to 9 percent with the amount of increases varying by product. This follows a Feb. 1, 2011, price increase of 2.5 percent on nearly all light vehicle products. We have also been steadily increasing prices in other regions where we participate.”

For the foreseeable future, it will clearly cost more to let the rubber hit the road.